Image by bobbyrusso sourced from pixabay
I joined Patrick Ceresna and Kevin Muir on The Market Huddle for a wide-ranging conversation covering all things macro. Be sure to stick around for the extended interview where we discussed some truly controversial subjects like reflexivity, inflation, the Eurodollar system, bank bailouts, and more. It was a lot of fun and I hope you enjoy listening to it.
You can download it here as a podcast or watch it here on YouTube.
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great interview – i have respect for both sides of the MMT argument – but if everyone ends up doing the same globally then the market finds it hard to punish individual fx or bond markets – the rest of the developed world will be close behind the US if MMT starts here, and if that is the case then the winning stock markets will be the countries who have the most convincing growth plans with MMT – i just listened to Lacy Hunt on macro voices and although i have a lot of respect for his views – wasn’t everyone saying in 2009 that QE would create hyper inflation and much higher bond yields.. MMT as i see if is just a fiscal QE or QE for main street – if all developed markets are on the same path then the fixed income arbitrage continues and keeps a cap on US yields – no?
Hello Jamie, thanks for the comment. You are correct that MMT is just another euphemism for fiscal expansion. That’s it. And yes, ONLY fiscal expansion can lead to CPI inflation, as we learned from QE. QE did however contribute to financial asset price inflation because those reserves could ONLY be used to purchase USTs and MBSs; the entire “transmission mechanism” theory proved to be wrong. Not surprisingly MMT has a technocratic bent to it where the policymakers are to expertly allocate capital to the private economy. Don’t believe me? Then why not just eliminate taxes and then hike them when “inflation” surfaces? Spoiler alert, they don’t like that. I wonder why? Check out this great article by Charles Gave for some more: https://blog.evergreengavekal.com/not-modern-not-about-money/
Wrt investment markets, let’s see what events actually unfold. I suspect that MMT won’t be tried, but if it is, I that it will be CPI inflationary to the extent that it is implemented, precisely because it pumps money into the goods purchasing part of the economy (what CPI measures).